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INVESTORS
EOG Resources Reports Second Quarter 2007 Results, Increases Full Year 2007 Production Growth Target to 11.5 Percent
HOUSTON, Aug. 2 /PRNewswire-FirstCall/ -- EOG Resources, Inc. (NYSE: EOG) (EOG) today reported second quarter 2007 net income available to common of $306.1 million, or $1.24 per share. This compares to second quarter 2006 net income available to common of $329.6 million, or $1.34 per share.
The results for the second quarter 2007 included a previously disclosed $44.1 million ($28.4 million after tax, or $0.12 per share) net gain on the mark-to-market of financial commodity price transactions. During the quarter, the net cash realized related to financial commodity contracts was $18.6 million ($12.0 million after tax, or $0.05 per share). Consistent with some analysts' practice of matching realizations to settlement months, adjusted non-GAAP net income available to common for the quarter was $289.7 million, or $1.17 per share. Adjusted non-GAAP net income available to common for the second quarter 2006 was $285.3 million, or $1.16 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)
2007 Production Growth Target Increased
"Based on the increased momentum of our production growth, we are raising our full year 2007 total company growth target from 10 to 11.5 percent," said Mark G. Papa, Chairman and Chief Executive Officer. "One hundred percent of this growth is organic, which is significant for a company our size."
The increased 2007 production growth target is primarily driven by higher than anticipated United States crude oil and natural gas liquids (NGL) production for the second half of the year. Outstanding results from recent horizontal oil wells drilled in the North Dakota Bakken Play have boosted EOG's confidence in increasing oil production targets. In the western counties of the Fort Worth Basin Barnett Shale, recent wells have produced natural gas yielding stronger than anticipated NGL production.
Operational Highlights
EOG's natural gas production in the United States increased approximately 24 percent for the second quarter over the same period a year ago with particularly robust growth from the Fort Worth Basin Barnett Shale, East Texas, Rocky Mountain and Mid Continent areas.
In the Barnett Shale, EOG continues to make improvements in the application of well completion technology that has led to higher initial production rates and potentially higher recovery efficiencies, particularly in Johnson County. In East Texas, a new natural gas processing facility has provided additional capacity for EOG's natural gas production from the Branton Field where eight wells are producing approximately 14 million cubic feet per day (MMcfd), net.
Outside of the Barnett Shale, total production in the United States and Canada increased approximately 7 percent for the first six months of 2007 as compared to the same period a year ago, in part due to a 12 percent increase in United States crude oil and condensate production driven by drilling programs in North Dakota, Texas and Kansas. EOG is applying horizontal drilling technology to oil plays in both North Dakota and the Mid Continent. Currently operating a four-rig drilling program in the North Dakota Bakken, EOG plans to add an additional rig in the fourth quarter. In the Mid Continent area, recent success has set up several offset drilling locations for the second half of 2007.
While maintaining an active exploration effort in the pursuit of shale gas opportunities in Appalachia, EOG announced its intention to sell its shallow gas assets and associated 18 MMcfd of current natural gas production in the area. The sale is expected to close in either late 2007 or early 2008. Proceeds from the sale will be used to fund EOG's core portfolio and resource plays that have greater potential for production and reserve growth. Following the divestiture, EOG will continue to target an average of 9 percent total company production growth for 2008.
Well Highlights
North Dakota Bakken
-- Zacher 1-24H - EOG has a 75 percent working interest in the Zacher
1-24H that was completed in June with a peak production rate of 1,774
barrels of oil per day (Bopd), gross.
-- Hoff 1-10H - EOG has a 75 percent working interest in the Hoff 1-10H,
which began flowing to sales in June at a peak rate of 2,034 Bopd,
gross.
-- N&D 1-05H - EOG holds a 67 percent working interest in the N&D 1-05H,
which was completed in July at an initial peak production rate of
1,610 Bopd, gross.
Fort Worth Basin Barnett Shale - Johnson, Palo Pinto and Hood Counties
-- Hughes Unit #1H - EOG completed the Hughes Unit #1H during the second
quarter. The well, located in central Johnson County, flowed to
sales at a peak production rate of 12 MMcfd, gross. EOG has an 86
percent working interest in the well.
-- Eagle Ford C Unit #4H and #5H - Drilled in the eastern part of
Johnson County, the two wells were completed in June with initial
production rates of 6.7 and 7.7 MMcfd, respectively. EOG has a 100
percent working interest in both wells.
-- Maples Unit #1H, #2H and #3H - EOG completed the three Maples Unit
wells during July in eastern Johnson County. EOG has a 54 percent
working interest in these three wells that began flowing to sales at
initial production rates ranging from 5.8 to 9.9 MMcfd, gross.
-- McInroe A Unit #1H - EOG has a 100 percent working interest in this
western extension well in Palo Pinto County. The McInroe A Unit #1H,
which tested at a rate of 2.6 MMcfd, will be connected to sales
during the third quarter.
-- Mabery A and B Unit #1H - Drilled in EOG's western extension acreage
in Hood County, the wells began initial production in July at 1.8 and
2.1 MMcfd, gross, respectively. EOG has a 78 percent working
interest in both the Mabery A and B Unit #1H.
Mid Continent
-- Willis 23 #1 - EOG's second oil discovery from the St. Louis
Formation in Kansas, the Willis 23 #1, began flowing to sales at a
rate of 800 Bopd. EOG has a 100 percent working interest in the
well.
-- Cooper 358 #1H - A horizontal Cleveland well in the Texas Panhandle,
the Cooper 358 #1H tested at 3.0 MMcfd and 700 Bopd. EOG has a 100
percent working interest in the well.
Conference Call Scheduled for August 3, 2007
EOG's second quarter 2007 conference call will be available via live audio webcast at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) Friday, August 3, 2007. To listen, log on to http://www.eogresources.com. The webcast will be archived on EOG's website through Friday, August 17, 2007.
EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea. EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG".
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts, including, among others, statements regarding EOG's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan," "target" and "believe" or the negative of those terms or other variations of them or by comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results, the ability to replace or increase reserves or to increase production, or the ability to generate income or cash flows are forward- looking statements. Forward-looking statements are not guarantees of performance. Although EOG believes its expectations reflected in forward- looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among others:
-- the timing and extent of changes in commodity prices for crude oil,
natural gas and related products, foreign currency exchange rates,
interest rates and financial market conditions;
-- the extent and effect of any hedging activities engaged in by EOG;
-- the timing and impact of liquefied natural gas imports;
-- changes in demand or prices for ammonia or methanol;
-- the extent of EOG's success in discovering, developing, marketing and
producing reserves and in acquiring oil and gas properties;
-- the accuracy of reserve estimates, which by their nature involve the
exercise of professional judgment and may therefore be imprecise;
-- the ability to achieve production levels from existing and future oil
and gas development projects due to operating hazards, drilling risks
and the inherent uncertainties in predicting oil and gas reservoir
performance;
-- the availability and cost of drilling rigs, experienced drilling crews,
tubular steel and other materials, equipment and services used in
drilling and well completions;
-- the availability, terms and timing of mineral licenses and leases and
governmental and other permits and rights of way;
-- access to surface locations for drilling and production facilities;
-- the availability and capacity of gathering, processing and pipeline
transportation facilities;
-- the availability of compression uplift capacity;
-- the extent to which EOG can economically develop its Barnett Shale
acreage outside of Johnson County, Texas;
-- whether EOG is successful in its efforts to more densely develop its
acreage in the Barnett Shale and other production areas;
-- political developments around the world and the enactment of new
government policies, legislation and regulations;
-- acts of war and terrorism and responses to these acts; and
-- weather, including weather-related delays in the installation of
gathering and production facilities.
In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements might not occur. Forward-looking statements speak only as of the date made and EOG undertakes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. As noted above, statements of proved reserves are only estimates and may be imprecise. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include not only proved reserves, but also other categories of reserves that the SEC's guidelines strictly prohibit EOG from including in filings with the SEC. Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for fiscal year ended December 31, 2006, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC's website at http://www.sec.gov.
EOG RESOURCES, INC.
FINANCIAL REPORT
(Unaudited; in millions, except per share data)
Quarter Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Net Operating Revenues $1,055.2 $919.1 $1,930.5 $2,003.6
Net Income Available to
Common $306.1 $329.6 $522.9 $754.4
Net Income Per Share
Available to Common
Basic $1.26 $1.36 $2.15 $3.13
Diluted $1.24 $1.34 $2.12 $3.07
Average Number of Common
Shares
Basic 243.2 241.6 243.0 241.4
Diluted 247.3 245.9 247.0 245.8
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
Quarter Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Net Operating
Revenues
Wellhead Natural
Gas $790,456 $642,969 $1,526,098 $1,432,030
Wellhead Crude Oil,
Condensate and
Natural Gas
Liquids 218,696 185,036 393,560 369,754
Gains on Mark-to-
Market Commodity
Derivative
Contracts 44,103 91,022 4,302 198,046
Other, Net 1,988 61 6,496 3,794
Total 1,055,243 919,088 1,930,456 2,003,624
Operating Expenses
Lease and Well 123,188 87,287 227,513 174,771
Transportation
Costs 41,591 25,913 79,339 54,009
Exploration Costs 41,216 35,313 67,600 74,705
Dry Hole Costs 11,816 14,668 28,626 25,394
Impairments 20,804 22,680 44,846 45,453
Depreciation,
Depletion and
Amortization 259,780 192,928 504,122 370,580
General and
Administrative 47,183 38,607 91,062 74,898
Taxes Other Than
Income 62,047 46,858 102,695 100,552
Total 607,625 464,254 1,145,803 920,362
Operating Income 447,618 454,834 784,653 1,083,262
Other Income, Net 29,069 21,844 34,993 36,400
Income Before
Interest Expense and
Income Taxes 476,687 476,678 819,646 1,119,662
Interest Expense, Net 10,818 12,384 18,456 25,537
Income Before Income
Taxes 465,869 464,294 801,190 1,094,125
Income Tax Provision 158,816 132,877 276,470 336,001
Net Income 307,053 331,417 524,720 758,124
Preferred Stock
Dividends 990 1,858 1,865 3,716
Net Income Available
to Common $306,063 $329,559 $522,855 $754,408
EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
Quarter Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Wellhead Volumes and Prices
Natural Gas Volumes (MMcfd) (A)
United States 960 776 938 767
Canada 232 225 227 227
United States & Canada 1,192 1,001 1,165 994
Trinidad 250 265 251 274
United Kingdom 22 25 26 30
Total 1,464 1,291 1,442 1,298
Average Natural Gas Prices ($/Mcf)
(B)
United States $6.80 $6.33 $6.61 $7.04
Canada 6.70 6.28 6.57 7.08
United States & Canada
Composite 6.78 6.32 6.60 7.04
Trinidad 2.04 2.18 2.42 2.31
United Kingdom 4.35 6.34 5.04 9.32
Composite 5.93 5.47 5.85 6.10
Crude Oil and Condensate Volumes
(MBbld) (A)
United States 23.4 19.5 22.6 20.2
Canada 2.4 2.4 2.5 2.5
United States & Canada 25.8 21.9 25.1 22.7
Trinidad 4.0 4.8 4.2 5.2
United Kingdom 0.1 0.1 0.1 0.1
Total 29.9 26.8 29.4 28.0
Average Crude Oil and Condensate
Prices ($/Bbl) (B)
United States $61.38 $67.69 $57.75 $63.70
Canada 60.08 62.62 55.88 57.12
United States & Canada
Composite 61.26 67.06 57.56 62.92
Trinidad 75.16 67.47 67.32 64.45
United Kingdom 68.82 65.80 59.61 61.04
Composite 63.15 67.13 58.96 63.21
Natural Gas Liquids Volumes
(MBbld) (A)
United States 10.4 9.0 10.0 8.1
Canada 1.1 0.6 1.1 0.7
Total 11.5 9.6 11.1 8.8
Average Natural Gas Liquids Prices
($/Bbl) (B)
United States $45.35 $41.02 $41.40 $39.32
Canada 42.30 46.55 39.39 44.56
Composite 45.04 41.38 41.20 39.72
Natural Gas Equivalent Volumes
(MMcfed) (C)
United States 1,163 947 1,134 937
Canada 253 244 248 246
United States & Canada 1,416 1,191 1,382 1,183
Trinidad 274 293 276 305
United Kingdom 23 26 27 30
Total 1,713 1,510 1,685 1,518
Total Bcfe (C) 155.8 137.4 305.0 274.8
(A) Million cubic feet per day or thousand barrels per day, as applicable.
(B) Dollars per thousand cubic feet or per barrel, as applicable.
(C) Million cubic feet equivalent per day or billion cubic feet
equivalent, as applicable; includes natural gas, crude oil, condensate
and natural gas liquids. Natural gas equivalents are determined using
the ratio of 6.0 thousand cubic feet of natural gas to 1.0 barrel of
crude oil, condensate or natural gas liquids.
EOG RESOURCES, INC.
SUMMARY BALANCE SHEETS
(Unaudited; in thousands, except share data)
June 30, December 31,
2007 2006
ASSETS
Current Assets
Cash and Cash Equivalents $58,534 $218,255
Accounts Receivable, Net 741,907 754,134
Inventories 116,300 113,591
Assets from Price Risk Management
Activities 60,850 130,612
Income Taxes Receivable 39,671 94,311
Other 46,506 39,177
Total 1,063,768 1,350,080
Oil and Gas Properties (Successful
Efforts Method) 15,890,787 13,893,851
Less: Accumulated Depreciation,
Depletion and Amortization (6,550,931) (5,949,804)
Net Oil and Gas Properties 9,339,856 7,944,047
Other Assets 120,640 108,033
Total Assets $10,524,264 $9,402,160
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $925,829 $896,572
Accrued Taxes Payable 101,372 130,984
Dividends Payable 22,052 14,718
Deferred Income Taxes 54,895 144,615
Other 54,384 68,123
Total 1,158,532 1,255,012
Long-Term Debt 883,842 733,442
Other Liabilities 328,121 300,907
Deferred Income Taxes 1,861,180 1,513,128
Shareholders' Equity
Preferred Stock, $0.01 Par,
10,000,000 Shares Authorized:
Series B, Cumulative, $1,000
Liquidation Preference Per
Share, 53,260 Shares Outstanding
at June 30, 2007 and
December 31, 2006 52,951 52,887
Common Stock, $0.01 Par,
640,000,000 Shares Authorized and
249,460,000 Shares Issued 202,495 202,495
Additional Paid In Capital 162,594 129,986
Accumulated Other Comprehensive
Income 328,918 176,704
Retained Earnings 5,640,660 5,151,034
Common Stock Held in Treasury,
4,655,082 Shares at
June 30, 2007 and 5,724,959
Shares at December 31, 2006 (95,029) (113,435)
Total Shareholders' Equity 6,292,589 5,599,671
Total Liabilities and Shareholders'
Equity $10,524,264 $9,402,160
EOG RESOURCES, INC.
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months
Ended June 30,
2007 2006
Cash Flows from Operating Activities
Reconciliation of Net Income to Net
Cash Provided by Operating
Activities:
Net Income $524,720 $758,124
Items Not Requiring Cash
Depreciation, Depletion and
Amortization 504,122 370,580
Impairments 44,846 45,453
Stock-Based Compensation Expenses 29,542 19,618
Deferred Income Taxes 223,591 153,552
Other, Net (4,912) (7,485)
Dry Hole Costs 28,626 25,394
Mark-to-Market Commodity Derivative
Contracts
Total Gains (4,302) (198,046)
Realized Gains 65,880 93,913
Other, Net (3,951) 4,710
Changes in Components of Working
Capital and Other Assets and
Liabilities
Accounts Receivable 20,734 169,350
Inventories (2,476) (35,066)
Accounts Payable 14,651 (5,225)
Accrued Taxes Payable 26,191 (11,470)
Other Assets (4,683) 28,160
Other Liabilities (20,420) (25,422)
Changes in Components of Working
Capital Associated with
Investing and Financing
Activities (20,471) (9,708)
Net Cash Provided by Operating
Activities 1,421,688 1,376,432
Investing Cash Flows
Additions to Oil and Gas Properties (1,748,483) (1,189,927)
Proceeds from Sales of Assets 37,988 14,553
Changes in Components of Working
Capital Associated with
Investing Activities 20,412 9,742
Other, Net (32,114) (14,256)
Net Cash Used in Investing Activities (1,722,197) (1,179,888)
Financing Cash Flows
Net Commercial Paper and Revolving
Credit Facility Borrowings 180,400 10,000
Long-Term Debt Repayments (30,000) (102,550)
Dividends Paid (38,370) (27,712)
Excess Tax Benefits from Stock-
Based Compensation Expenses 11,122 20,841
Proceeds from Stock Options
Exercised and Employee Stock
Purchase Plan 14,089 11,143
Other, Net (194) (214)
Net Cash Provided by (Used in)
Financing Activities 137,047 (88,492)
Effect of Exchange Rate Changes on
Cash 3,741 7,245
(Decrease) Increase in Cash and Cash
Equivalents (159,721) 115,297
Cash and Cash Equivalents at
Beginning of Period 218,255 643,811
Cash and Cash Equivalents at End of
Period $58,534 $759,108
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON
(Non-GAAP)
TO NET INCOME AVAILABLE TO COMMON (GAAP)
(Unaudited; in thousands, except per share data)
The following chart adjusts three-month and six-month periods ended June
30 reported Net Income Available to Common to reflect actual cash realized
from oil and gas hedges by eliminating the unrealized mark-to-market gains
from these transactions, to add the one-time tax expense related to Texas
(US) franchise tax law revision in the second quarter of 2006 and to
eliminate tax benefits related to the Alberta (Canada) provincial tax rate
reduction and Canadian federal tax rate reduction in the second quarter of
2006. EOG believes this presentation may be useful to investors who
follow the practice of some industry analysts who adjust reported company
earnings to match realizations to production settlement months and make
certain other adjustments to exclude one-time items. EOG management uses
this information for comparative purposes within the industry.
Quarter Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Reported Net Income Available
to Common (GAAP) $306,063 $329,559 $522,855 $754,408
Mark-to-Market (MTM) Commodity
Derivative Contracts Impact
Total Gains (44,103) (91,022) (4,302) (198,046)
Realized Gains 18,613 63,859 65,880 93,913
Subtotal (25,490) (27,163) 61,578 (104,133)
After Tax MTM Impact (16,403) (17,479) 39,625 (67,010)
Add: Tax Expense Related to
Texas (US) Franchise Tax Law
Revision -- 5,221 -- 5,221
Less: Tax Benefit Related to
Alberta (Canada) Provincial
Tax Rate Reduction -- (13,449) -- (13,449)
Less: Tax Benefit Related to
Canadian Federal Tax Rate
Reduction -- (18,593) -- (18,593)
Adjusted Net Income Available
to Common (Non-GAAP) $289,660 $285,259 $562,480 $660,577
Adjusted Net Income Per Share
Available to Common (Non-
GAAP)
Basic $1.19 $1.18 $2.31 $2.74
Diluted $1.17 $1.16 $2.28 $2.69
Average Number of Common
Shares
Basic 243,227 241,613 242,976 241,370
Diluted 247,261 245,887 247,009 245,827
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF DISCRETIONARY CASH FLOW AVAILABLE TO COMMON
(Non-GAAP)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)
(Unaudited; in thousands)
The following chart reconciles three-month and six-month periods ended
June 30 Net Cash Provided by Operating Activities (GAAP) to Discretionary
Cash Flow Available to Common (Non-GAAP). EOG believes this presentation
may be useful to investors who follow the practice of some industry
analysts who adjust Net Cash Provided by Operating Activities for
Exploration Costs (excluding Stock-Based Compensation Expenses), Changes
in Components of Working Capital, Other Assets and Liabilities and
Preferred Stock Dividends. EOG management uses this information for
comparative purposes within the industry.
Quarter Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Net Cash Provided by
Operating Activities
(GAAP) $723,208 $589,665 $1,421,688 $1,376,432
Adjustments
Exploration Costs
(excluding Stock-
Based Compensation
Expenses) 38,230 32,995 61,574 70,660
Changes in Components
of Working Capital
and Other Assets and
Liabilities
Accounts Receivable 2,201 (34,200) (20,734) (169,350)
Inventories (6,368) 21,696 2,476 35,066
Accounts Payable 8,780 (4,310) (14,651) 5,225
Accrued Taxes Payable (24,224) 40,768 (26,191) 11,470
Other Assets 1,060 (20,775) 4,683 (28,160)
Other Liabilities 6,064 20,376 20,420 25,422
Changes in Components
of Working Capital
Associated
with Investing and
Financing Activities (12,223) (23,479) 20,471 9,708
Preferred Stock
Dividends (990) (1,858) (1,865) (3,716)
Discretionary Cash Flow
Available to Common
(Non-GAAP) $735,738 $620,878 $1,467,871 $1,332,757
SOURCE EOG Resources, Inc.
Contact: Investors, Maire A. Baldwin, +1-713-651-6EOG (651-6364), or Media and Investors, Elizabeth M. Ivers, +1-713-651-7132, both of EOG Resources